NZ/Aus/S. Africa - Weekly Update - Written by giles on Monday, May 18, 2009 3:07 - 0 Comments
World First NZD/AUD Weekly Update - 18th May 2009
NZD
Local economic data continues to point to stabilisation in some pockets.
Electronic card transactions for April showed total retail spending rose 0.3 percent, while core retail spending rose 0.5 percent over the month, however quarterly real spending tumbled 2.9 percent.
REINZ house sales for the month of April in seasonally adjusted terms house sales rose 19.6 percent in the month to 6,469 and the median days to sell fell 6 days to 44 days.
AUD
Business confidence is showing signs of stabilising in Australia at higher levels “relative” to very depressed levels earlier this year. Confidence was broadly unchanged, down a point to -14 points. The April result was driven by better readings in transport and mining partly offset by falling confidence in wholesaling. Confidence has stabilised at levels significantly up from the excessively negative reading of early 2009 when fear of global collapses reigned.
The week ahead:
NZD
Monday 18th – Producer Prices (Q1) qoq
Thursday 21st – Visitor Arrivals (Apr) mom, Credit Card Spending (Apr) yoy
AUD
Tuesday 19th – RBA’s Board May Minutes
Wednesday 20th – Westpac Consumer Confidence (May), Wage Cost Index (Q1) qoq
Thursday 21st – Consumer Inflation Expectation (May), New Motor Vehicle Sales (Apr) mom
GBPNZD
Last week the UK economy’s prospects made by Bank of England on Wednesday were dismal to say the least. Analysts have cited the gloomy tone from Mervyn King as further proof that the pound will fall hard in the coming months as the reality of the UK’s current account deficit dawns on market participants. The recent tax changes made by the government are not attractive to international investors and with £220bn of gilts to fund these sterling bears believe the failed gilt auctions in the future will crush the pound’s recent rally.
UK property data released last week showed that the RICS house price balance rose for the 6 month in row posting a figure not seen since August 1999, on an annual basis house prices have fallen 13.6. Manufacturing in the UK dropped by 0.1 percent against a consensus decline of 0.8 percent and although this leaves manufacturing output in the UK at over a 60 year low it also shows that the recession is softening. The unemployment rate in the UK has risen to 7.1 percent.
The GBPNZD progressed steadily in Sterling’s favour last week. GBPNZD was just shy of the 2.6 level on Monday morning and closed on Friday at 2.587. With not the most optimistic outlook for Sterling at present we expect any gains to be capped at the 2.63 level but for the rate to continue to trade around the 2.6 level this week.
The week ahead in the UK:
Monday 18th – Rightmove House Prices (May) mom
Tuesday 19th – CPI (Apr) mom
Wednesday 20th – Bank of England Minutes
Thursday 21st – Retail Sales (Apr) mom, Total Business Investment (Q1)
Friday 22nd – GDP (Q1) qoq
GBPAUD
Sterling managed to climb back over the GBPAUD 2.0 level last week after a weak start to the week where the rate traded below the 2.0 level up until Wednesday, from there we saw a climb up to the peak of the week of 2.0215 at close of play on Friday. Downside risk still weighing heavily on the Australian Dollar this week with the rate possibly tending to hover at the lower levels and perhaps trade in the 1.99 – 2.02 band this week. For data out in the UK this week please see GBPNZD above.
EURNZD
In the Euro zone industrial production figures revealed activity is continuing to plunge, down 20 percent on a year on year basis. The figure returned Euro zone industrial output back to 1997 levels. German GDP was released with Q1 falling by 3.9 percent versus an expected 3.0 percent figure and on a yearly figure a decline of -6.9 percent.
This week in New Zealand we expect the April international travel and migration results to show that fewer New Zealanders are choosing to leave and for net migration remain positive.
The EURNZD rate came back up slightly in Euros favour last week with a jump on Wednesday from the 2.25 level up into the 2.29’s where it remained for the remainder of the week. Movements in the EURNZD will look to come from data in the Euro zone with little on the New Zealand calendar this week.
The week ahead in the Euro zone:
Monday 18th – Trade Balance (Mar)
Tuesday 19th – ZEW Economic Sentiment (May), Construction Output (Mar) mom
Wednesday 20th – German Producer Prices (Apr) mom
EURAUD
Euro capatilised on all movements of this pairing last week with the rate gradually climbing from 1.775 on Monday to close on Friday at 1.795, peak of the week came on Thursday at 1.811 level. With a few pieces of second tier data out from both sides this week the rate may continue to hover around the 1.78- 1.79 level. For data out this week in the Euro zone please refer to EURNZD above.
NZDUSD
The latest release on the labour market showed a rise in the unemployment rate to a fresh cycle high of 8.9 percent, up from 8.5 percent March. The pace of job shedding appears to be abating, non-farm payroll employment fell by a better than expected 539K (median forecasts were -600k) and down from an average for Feb-Mar of -690K.
Crucially for the New Zealand Dollar will be the upcoming Budget next week. The government is focused on constructing a budget to prevent a rating downgrade. Why does a conservative budget matter so much? Because the sovereign wealth funds (SWF) of the world are the main buyers of our bonds, and we will need to sell lots of them given the deteriorating near-term fiscal position. If New Zealand is successful in attracting these flows, the currency may hold up.
The New Zealand Dollar slipped against the USD last week after spending brief stint above the 0.61 level on Monday to then slide to 0.587 on Friday. This week little movement is expected with perhaps another rally from the NZD to visit just north of the 0.60 level.
The week ahead in the US:
Tuesday 19th – NAHB housing Market Index (May)
Wednesday 20th – Housing Starts (Apr), Building Permits (Apr)
Thursday 21st – Minutes of April 29 FOMC Meeting
Friday 22nd – Initial Jobless Claims (w/e May 17), Leading Indicators (Apr)
AUDUSD
The USD is now being intensely questioned as a “safe haven” currency on account of its huge account deficit and quantitative easing. On Wednesday the USD fell sharply in response to an article in the Financial Times suggesting that the US’s AAA credit rating was at risk.
If risk appetite and commodity prices continue to hold up then the AUDUSD maybe continue its stay around the 0.74 level. For data out in the US this week please refer to NZDUSD above.
AUDNZD
The Australian Dollar tipped the 1.28 level on Friday last week and the majority of the week being spent above the 1.26 level. With the current Australian Dollar strength of late this rate is not expected to move south anytime soon and with market estimates of the AUDNZD rallying towards the 1.29 – 1.30 level not off the cards at present. Nest weeks New Zealand Budget should shed some light on some future movements of the New Zealand Dollar.
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Please feel free to contact me (renee.doughty@worldfirst.com) if you have any questions or thoughts regarding these updates or if you are interested in a particular event in the calendar.
If you would like to discuss your foreign exchange requirements then please don’t hesitate to call our Southern Hemisphere Office on our New Zealand Free phone number 0800 666114 , or Australian Free phone number 1800 701540.
Disclaimer: The above comments are only our views and should not be construed as advice. You should act using your own information and judgement. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgement as of the date of the briefing and are subject to change without notice.
Any rates given are “interbank” i.e. for amounts of £5million and thus are not indicative of rates offered by World First for smaller amounts.
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